We are seeing the appearance of alternative projects to the savage neo-liberalism

Hugo ChavezVenezuelan President

"The fact that Lula becomes president of Brazil could help to speed up the creation of this new bloc," Mr Chavez said.

"Latin America is once more witnessing a current that is freeing people."

If Mr da Silva wins Sunday's elections, it will end Mr Chavez's isolation as the most radical leftist reformer in South America in recent years.

Venezuela is the world's fifth biggest oil producer and major supplier to the US and Brazil is the world's ninth largest economy and the largest in Latin America.

Shared concerns

Both men are critical of the policies of the International Monetary Fund and other US dominated international institutions.

Mr Chavez, who promotes the ideology of 19th century South American liberator Simon Bolivar, has described taking IMF money as "giving a patient poison".

Lula worries about a US led trade block

"We are seeing the appearance of alternative projects to the savage neo-liberalism, that was imposed on our people for a long time, almost destroyed Argentina entirely and increased marginality and debt," he added.

Mr da Silva has also been lukewarm in his support for the Free Trade Area of the Americas (FTAA), which he fears could damage Brazilian industry and agriculture.

Brazil and the US will co-chair the FTAA negotiations, which are due to begin in November.

Recent columns in the Washington press have described Mr Chavez, his close ally in Cuba Fidel Castro, and Mr da Silva as the Latin American "axis of evil".

Mr Chavez dismissed this comparison as "irrational".

Negative campaigning

The victory of Mr da Silva, a former metalworker and trade unionist, in the world's fourth largest democracy looks all but inevitable on Sunday.

Chavez expects Lula to win

In an attempt to turn the tide, opponent and ruling party candidate Jose Serra, has begun "negative campaigning", attacking Lula's economic credentials and likening him to Mr Chavez.

Brazil's incumbent president, Fernando Henrique Cardoso, has had to intervene on his candidate's behalf describing the comments as "superficial" after it turned into a diplomatic dispute.

But Mr Chavez said regardless of who wins, relations will remain good.

"No matter who wins the elections, Lula or Serra, they will enjoy our endorsement and we will work together to integrate the South American region," he said.

Lula moderates

Mr da Silva, who has campaigned to reduce unemployment which has doubled under Mr Cardoso, has recently watered down his rhetoric and is now described by analysts as centre-left.

He has promised to apply prudent economic policies and help the financial markets after the main stock index fell 30% this year and the currency 40% against the dollar.

Former coup leader Lucio Gutierrez, who scored a surprise win on Sunday in the first round the presidential elections, has been called by his opponent a dangerous communist who would wreck the economy.

Gutierrez admires Chavez's "bravery"

Mr Gutierrez, who helped lead a 2000 Indian revolt that
overthrew President Jamil Mahuad, won 20.3% of the against the 17.4% of billionaire banana tycoon Alvaro Noboa, Ecuador's richest man.

"The people will have to choose between a Fidel
Castro-styled communist government and a government of private firms, jobs and economic recovery," Mr Noboa said.

A run-off will be held on 24 November because neither attracted enough votes for an outright victory.